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Monthly Archives: August 2009

Common wisdom, over the past seven years, has been that consumers would spend money to tumesce just two things on the internet – their wallet and their wanker.

But what goes up must come down. Today that list has been cut in half – and the wallet may be the next to go. Unfortunately, that does not bode well for Rupert Murdoch’s plan to charge for everything his company publishes – and its bad news for the companies hoping that “TV Anywhere” will save television as we know it.

Porn used to be a shining example of how to make money on the internet. Heck, even Jennifer Ringley – with Jennicam – made a good living for seven years simply showing off her less than erotic life. From 1996 to about 2007 erotic services were all the rage online. Everyone from Penthouse to Hustler to more ribald sites were raking in the cash hand over fist.

But all good things come to an end. Magazines, newspapers, and now porn have been laid low by user-generated, free content. The culprits in this case? A bevy of free sites mimicking YouTube, with names like RedTube, YouPorn and PornHub. These freeview sites have thrown the niche paid-content model into a tailspin. According to Forbes.com, paid porn sites are down 30-50% in revenue in just a year.

According to my friend “Bob” (not his real name), who has done extensive research in this area, there’s more than just user-generated content swelling the pages of these sites. Much of the material is culled from professionally produced videos. Users cut out their favorite bits, upload them to the sites, and millions of others snack for free.

It’s even poised to take a bite out of cable and satellite services like the Spice channel and Playboy’s other channels. The shift to “over the top” video, where Hulu, CBS and other mainstream video sites are streamed directly to high-definition TV sets now includes easy ways for those smut sites to go big screen as well. One of my favorite PC-based services, called “Play ON” also supports YouPorn and RedTube. I use the service to stream Revision3 and other web video – along with Hulu – from my home PC to my 52” HD set via my XBOX 360. “Bob” uses it to watch humongous undulating and oscillating organs on his – for free.

So why should Murdoch be worried? It’s just low-life scum programming, right? Not exactly. Here’s a little known secret of the tech industry. The “adult entertainment” industry has been one of the most savvy and smartest early adopters of new technologies over the past 20 years. Porn pushed the adoption of a wide range of services, from text messaging to web video. And where porn goes, the rest of the industry usually follows.

The incredible erosion of the paid porn industry shows that when a free product is available – even an arguably inferior product – a very large fraction of the audience will defect to free. And this is now true even for high-quality video. That means that even if Fox manages to lock down all of its shows, and cable and satellite launch their paid “TV anywhere” product, a sizable fraction of consumers just won’t care. Lower quality free beats higher quality paid for many, many viewers every single time.

TV Anywhere is designed to stop the erosion of multichannel households – not to bring in new customers. But it’s doomed to failure. Many of our viewers at Revision3, millennial males, have either already abandoned cable and satellite or are seriously considering doing so. Pay walls will not deter their flight. When it comes to news, they’ll just find alternate versions elsewhere – even if it’s arguably not as good. When it comes to entertainment, the vast sea of free – coupled with piracy services that will not ever go away – will satisfy the bulk of their viewing needs. And when they watch a popular show, Netflix on demand – or the local video store – will help them satisfy that itch.

The adult industry’s latest desperate survival plan: go niche. When general sex sites don’t work, so the thinking goes, build a business on the backs of the fetishists. Thus we see subscription services (so “Bob” tells me) migrating to leather, bondage and shemale sites.

Those, too, are doomed – as a quick search on any of those free sites will attest. Relatively narrow cable channels take note: your days of sucking off of the hind teat of affiliate fees are rapidly drawing to a close. Your supposedly loyal audience will dump you like an over-the-hill hooker when they find out how easy it is to find compelling and free alternatives online.

Sure, a lot of people will adopt TV anywhere, and they will continue to pay for premium video services. But there won’t be enough to staunch the coming tide of red ink. Because just as porn developed an early adopter base that paid for the latest technology, it’s also a canary in the coal mine of free. Paid porn is dying. Paid TV will be next.

Part of me thinks I should have stayed there – I’m just confident enough (or egotistical enough) to think I’d be one of those 1,500 right now. But frankly, after seeing how the organization has gone so totally down hill, I’m glad I’m not – because clearly they’d rather take care of their employees than worry about satisfying a customer.

Here’s my sorry tale – which I know has been played out in various forms across countless consumer accounts. For years I had a Citibank credit card that I used – and paid off – every month. Sometime last year I got sold off to Chase Manhattan, and since I had to change credit card numbers anyway, I figured I’d look around for a better card. I found it, and subsequently stopped using that Chase card (I probably ran up all of 10 transactions on it, which I paid off immediately.

So today I just looked at my Chase Bill, and saw $55 worth of charges on it – including a $15 late fee and a $1 finance fee. I know the card hadn’t been used, so I called up the bank to find out what the charge was, and ask them to close the account and remove the charge.

It turns out, the charge was for a newly minted annual “membership” fee, which I’d missed by not seeing the previous statement. So they charged me a $39 annual card fee, then a $15 late fee, and $1 of interest on top of that. $55 for something I’d never asked for, never had to pay before, and for nothing of value.

When I politely asked for the charges to be reversed, because I’d never asked for them, I ran into the wall of pain. I was transferred first to a department that couldn’t help me, and then to a representative named “Justin”.

Justin told me that I’d asked for the card, that they had sent me a copy of the terms that included the annual fee, and that there was nothing he could do. “There are no waivers of any fees at all anymore”, he told me, saying that it was new bank policies. I asked to speak to a supervisor, and first Justin told me that “we don’t have anyone available”, and when I pressed, said that it was bank policy and that “we are not allowed to pass to supervisors.” According to “Justin” (Chase policy also forbid him from giving me his last name or employee number), he was the last person I was going to talk to at Chase, no matter what

Got a problem with that, he said? If so, I was advised to write a letter.

So in the end, JP Morgan Chase stole $55 from me. But it’s their loss, because they just lost a customer for life – and hopefully you’ll think twice before purchasing a product, service or credit card from them.

Yes, at one time, Chase Manhattan was a solid, respectable bank that cared for its customers and its employees – I know, because I was one. But now they’re just a money-grubbing, faceless, nasty organization that would rather steal than serve. And in today’s transparent society, that’s not just wrong, it’s bad business too.

By the way, if you want to write a letter, here’s the address:

Chase Card Services, box 182918 OH1-0554 Westerville Ohio 43081

I’ll be sending them a letter, but I’m not holding my breath on the response.